Exclusive: CNR investigates ICO tracking websites – and it turns out that the way they manage recommendations very much varies…
Overwhelmed by the growing number of ICOs? Wondering how to keep track of them all? How to know where to invest? The answer for many would-be investors is trackers — websites that review or score projects of those that merely list ICOs with helpful information about where to view whitepapers and who is involved.
But be wary: not all sites are doing their due diligence or even updating their websites when projects are uncovered as scams. When tracker sites do nothing other than list whoever pays them, be it cash or tokens as some are rumoured to — and based on the number of reputable sites actively advertising that they don’t take such payment, it’s clearly happening — it’s hard for investors to know whether the information they’re reading is of any use.
How ICO trackers work
With any tracker you use, pay attention to how it works. ICO Watchlist marks some ICOs as gold or silver, but clearly states on its website that those are sponsored designations and not an indicator of quality. While that’s an honest admission, it’s easy to expect an investor quickly glancing at the page without spotting that warning.
ICO Tracker lets any project list, with its own “curators” assigning it points based on its whitepaper, roadmap, team, escrow and offering conditions. It warns “you should not make any decisions on this rating because it’s completely subjective,” however.
Smith and Crown makes it clear that projects aren’t charged for listing, and must supply basic information about their team, and have a working website, whitepaper and other signs of a healthy project. For projects to be reviewed, the team must submit to an hour-long interview.
ICO Formula has created the “formulatron” to tally up scores, taking into account everything from how important an idea is to who the advisors are and the “tokenomics” of the project before assigning it a score, keeping it up to date with new information when it arises.
Such efforts are the core of due diligence. If you’re looking at a tracker that doesn’t at least claim to look into the team behind a project, check if they’re still answering questions over email or social media, and peek at the website to see if it’s still online, you’ll probably not want to be taking advice from that tracker. Better tracker sites will ask to see passports of staff and proof that the company exists, while it’s a good idea for anyone to at least make sure the listed staff are real — harder than it sounds if they’ve faked social accounts, but easy to spot if every photo is of Ryan Gosling.
Crypto Briefing managing editor Jon Rice told us that tracker does “significant due diligence” before bothering to review an ICO, not least because shared projects are those “in which we intend to invest, as a team”. Rice said the site doesn’t take cash or tokens for coverage, and doesn’t even take ads. “And yes, many of the ‘influencers’ out there do. We simply don’t want to, need to, or agree with it,” he says.
What does due diligence look like to Rice? Their CTO reviews the code, the project is benchmarked against existing projects or ideas, and there’s always an interview with one of the team’s principal members, Rice says. It can take between one to three weeks to gather all the information.
“We have over 50 separate data points for the initial rating alone, and then we examine the wider business case,” he says. “For this, we use widely-accepted diligence procedures such as estimating the TAM (Total Addressable Market) and the potential for market share within it. Although marketing and hype is one factor, we have proprietary algorithms to derive activity beyond simply the number of users in a Telegram group.”
Scams can still slip through, of course. “We cannot state with 100% certainty that any given project is not fraudulent; but we have yet to review one that is, and we hope it never occurs,” he says.
Plenty of scams
Indeed, CryptoCompare is another tracker that does vet projects, but back in March was caught out when an ICO called Denaro that had bought advertising in its newsletter turned out to be a scam, making away with millions of dollars. CryptoCompare apologised at the time.
“It’s very difficult, people submit these projects and we just record the ones that are out there,” explains Charles Hayter, founder and CEO at CryptoCompare. “We’re not advising, we’re not giving ratings, that’s something that’ll come down the line… there’s lots of ratings out there. We just record what’s out there, and let the community separate the wheat from the chaff.”
“As soon as we were warned about it… we refused to take it anymore,” he said of the advertising the ICO had bought. “We were trying to provide a platform that’s unbiased, accurate and timely, but unfortunately mistakes happen… When people hide behind the internet, sometimes it’s very difficult to stop it. When you do make a mistake, the only thing you can do is apologise and try to avoid it happening again.”
That wasn’t the only scam to hit trackers. At the end of January, the folks behind the Benebit ICO scarpered, taking millions of investors’ dollars with them. Plenty of tracker sites haven’t bothered to update their listings about Benebit or simply deleted it. It’s listed without warning, or no warning other than a low overall score or high risk score.
Reviews site Cryptosis still lists the ICO, but has responsibly flagged Benebit as a scam on its site — admitting cryptocurrencies are “still the wild west” — but helpfully left up its original analysis, which gave it a negative rating and “ICO grade” of just 10%. Well spotted, that’s an example of such tracking sites offering helpful information.
Of course, plenty of ICOs simply fail — they aren’t necessarily scams, just bad ideas or poorly run. Tracker TokenData has revealed that 46% of last years crowdsales are already out of business. That means it’s no surprise that even well reviewed ICOs will be among those failures.
In the end, you simply need to do your own research — as with any investment, if it looks too good to be true, you know it probably is.
“Always fact-check using multiple, independent sources — use multiple ranking and rating sites to judge projects, not all rating sites work the same way. If a project has mixed ratings, find out why before committing funds,” says Pete M of ICO Formula, advising investors to take the time to look at social media, forums, and the project’s own website to get the full picture. “If it looks, feels or sounds suspicious, chances are you’re right and should resist the FOMO (Fear of Missing Out).”
It could be time for standards and regulation, says Hayter. “As the industry matures, accountability will be something that will be much more [important],” he says, adding that he expects to see regulators mimic how the capital markets work.
He adds: “But that will come with time… it’s a wild west, but that’s part of the fun of it I’m afraid.” In the meantime, it’s up to investors to keep their wits about them — and not necessarily trust every tracker that’s popped up. In other words, just as you’d expect them to do their due diligence when listing projects, make sure you do yours on which tracker to trust.